NIGEL FARAGE set up an offshore trust in a bid to slash his tax bill, we can reveal today.

The UKIP leader paid a tax adviser to create the Farage Family educational Trust 1654 on the Isle of Man through which he intended to channel funds.

The 49-year-old said he did not benefit personally from the trust and even claimed he ended up out of pocket.

The outspoken anti-Europe politician confessed its existence during a string of meetings with an investigator from our sister paper the Daily Mirror.

He said: “My financial advisers recommended I did it, to have a trust really for inheritance purposes and I took the advice and I set it up.

“It was a mistake. I was a completely unsuitable person for it. I am not blaming them, it was my fault.

“It’s a vehicle that you chuck things in through your life that you don’t need and you build up a trust fund for your children or grandchildren.

“It was called an ­educational trust and could have been used for grandchildren’s schools fees, things like that.

“It was a mistake for three reasons. Firstly, I’m not rich enough to need one and I am never going to be.

“Secondly, frankly, the world has changed. Things that we thought were absolutely fair practice 10 years, 20 years ago, 30 years ago aren’t any more. Thirdly, it was a mistake because it cost me money. I sent a cheque off to set it up.”

Tax expert Richard Murphy, said: “There are only two good reasons to set up an Isle of Man trust. One is secrecy, you don’t want someone to know what is in there. The other is tax avoidance. And sometimes, of course, they go together.”

Tax dodging costs Britain £35billion a year, according to HM Revenue and Customs, but Tax Research experts say it is as much as £123billion.

David Cameron backed a landmark deal at the G8 summit this week to crack down on corporate tax evasion.

Farage was confronted with financial documents as he campaigned for UKIP in Aberdeen. These revealed he transferred his shareholding in Farage Limited after it was founded in 2003 to the Farage Family Educational Trust, based in Douglas, Isle of Man.

This meant the trust owned a 33 per cent stake in Farage Limited, later rising to 50 per cent.

Quizzed about the Farage Family ­Educational Trust, the politician insisted: “I was not a beneficiary.”

When shown a copy of Farage Limited accounts from 2004 indicating he owned shares in the city trading firm, he declared: “They are wrong then, aren’t they? I originally had the shares. I gave them away to the trust.”

Asked who set up the trust, Farage replied: “I set it up on behalf of somebody else.”

Pressed on who were the owners of the trust, Farage said: “There are none. It is closed.”

His brother Andrew, a co-director who owned the other 50 per cent of the company, ­pocketed £969,000 in dividends from the firm. Farage initially refused to confirm the payment went to his sibling.

Asked if the payouts went to Andrew, he replied: “They must have done.”

And pushed on who received the £969,000, he said: “It’s a slightly unfair question because you are asking me to implicate someone else’s tax affairs.

“It’s sensitive and the sums of money are quite big. You’re talking about nearly a million quid.

“The accountant who set up the company is prepared to speak to you.

“He will tell you on the record that I never received any dividends at all from that company ever and it all went to one ­individual. It’s not difficult to work out who it was.”

Farage Limited’s accountant Spencer Watson later confirmed that all £969,000 in dividends were paid to Andrew.

Farage’s 47-year-old brother said: “I don’t want to make any comment. If I did, I did.

“If that’s what I earned, that’s what I earned. All my money was paid and tax was paid on it in this country. Nigel had nothing to do with those monies. But if that’s what my accountant is saying then that's fine.”

Farage himself claimed he was “unpaid during that period of time”.

He added: “I packed up business completely in 2004.”

But on his Declaration of Members’ Financial Interests for the European ­Parliament dated January 2004, he stated that he was paid for being a director of Farage Limited.

In every annual declaration from 2004 to 2009, Farage stated he was paid for “commodity broking”.

Farage Limited was his only company appointment registered at Companies House.

Asked why he told EU ­officials he was paid for “commodity broking” when he had said he had given up business in 2004, he replied: “Just to be careful, purely caution. I was over-declaring. I didn’t need to do it.”

He said he was unpaid as secretary and it was “an act of brotherly love”.

Companies House documents show the offshore trust remained a shareholder in Farage Limited until 2011.

The right-winger insisted it shut down in 2007 or 2008. He said: “I sent a cheque off to set it up, out of my own taxed income, and basically just through administration fees that money disappeared.”

Accountant Spencer Watson said he was not involved in setting up the Isle of Man trust for Farage.

He revealed Farage Limited lost a major client in 2011 and owed unpaid corporation tax.

Six weeks after the Eurosceptic resigned as company secretary in 2011, HMRC filed a petition to wind up the company.

Farage Limited went into a “voluntary arrangement” in 2011, one step short of going into administration.